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TMI Blog1982 (8) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... al held that there has been in fact sale of the binding materials by the assessee to the binders, and that the sale is established by the factum of the binders having given deduction in the labour charges payable to them to the extent of the value of the binding materials supplied by the assessee. In that view, the Tribunal sustained the addition of the sum of Rs. 73,278.67 to the turnover returned by the assessee. The decision of the Tribunal is under challenge before us. Before we deal with the respective contentions of the parties, it is necessary to state the factual position. The assessee who is a dealer in stationery goods places orders with two binders, namely, Raja Binding Works and Indira Binding Works, for the purpose of binding note books, stationery books, etc., at agreed labour charges. It is the assessee who supplies paper for the note books and stationery books to be bound by the binders. This is clear from the order placed with the binders, which makes it clear that the paper is supplied by the assessee. In addition to paper, the asseseee has supplied the binding materials to the binders in bulk and the approximate cost of binding materials used in relation to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to any particular work order is not in dispute. However, what the learned counsel for the assessee contends is that the assessee, with a view to see that cheap binding materials are not used by the binder, even at the time of placing of the work order had stipulated that the binder has to use only the binding materials supplied by the assessee in connection with all the work orders placed by him with the binder and that to the extent of the binding materials used in relation to a particular work order, the cost of the binding materials have to be deducted from the labour charges payable in respect of that work order, and in pursuance of that understanding the assessee purchased binding materials from the market and supplied the same to the binders in bulk for the purpose of utilising the same in connection with all the work orders placed with them. It is said that though the binding materials were supplied in bulk and there is no correlation between the binding materials supplied and the binding materials utilised in any particular work order, the intention of the parties was clearly that the binding materials have to be utilised only in connection with the binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted, the deduction of the value of the binding materials should be construed as indicating an earlier sale by the assessee to the binder. We are not in a position to understand the above reasoning. It is not as if the binder charges an all inclusive price for the stationery book bound and supplied by him to the assessee. He charges only the binding charges, that means, excluding the cost of the paper. Therefore the fact that the cost of the paper has not been included in the binding charges will not show one way or the other as regards the value of the binding materials which they have chosen to deduct from the labour charges. Admittedly the supply of binding materials has been made by the assessee to the binders. It is no doubt true that such supply was only in bulk and not in relation to any particular work order placed by the assessee. The authorities below have made much about the difficulty in correlating the binding materials supplied and the binding materials actually used in relation to any particular work order. But the difficulty in correlation will not in any way indicate the intention of the parties to treat the supply of binding materials as an outright sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the assessee to the binders as has been held by the authorities below. The view we have taken finds support from a decision of a Bench of this Court in State of Madras v. Sheik Ismail Sons [1974] 34 STC 464, to which one of us was a party. In that case a manufacturer of beedies supplied tobacco, beedi leaves and thread to contractors under a written agreement for rolling them into beedies at fixed rate. At the time of the supply of tobacco, beedi leaves and thread the manufacturer had debited their value against the contractor and this was deducted while making payment to the contractor on the supply of finished goods. The question arose as to whether the supply of tobacco, beedi leaves and thread to the contractor amounted to sale. The revenue contended that the parties had proceeded specifically on the basis that there was a sale of Tobacco, beedi leaves and thread as is clear from the written agreement entered into between them, and therefore the supply of those materials should be taken to be a sale. This Court, after considering the contention advanced on behalf of the revenue, held that the agreement read as a whole suggested that though the transaction of supply o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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